ygsmilo: Interesting,,,, what is the Euro based on? The US dollar is based on the US Govt- ie. US treasury bonds. Look at the spread between German/French gov bonds vrs. US T-bonds. Especially short term yield curve. Then tell me if you would rather have your "cash" in the Euro.
Nothing. Just like dollar. I am not talking about rates this week but about global picture.
US bond yields have the same relation to reality as NASDAQ level had in 2000.
Foreign countries hold about 4 trillion of US debt. And how many trillions of dollars as their "currency reserves"? They have no chance to buy anything worthwhile for that money - otherwise we would not have this huge trade deficit, so why do thy still accept $500 billion a year in exchange for goods? What happens if they just stop taking it, not even dump it back causing the major drop in dollar and enormous inflation here?
Do you know how much dollar has to drop to correct $500 billion in trade imbalance?
US lost the backing for it - the soviet threat, the industrial dominance, the technological dominance. We control nothing that would make them accept dollars.
It need not necessarly be Euro - that is just the first challenger - they may try to replace some reserves with yuan, or gold or anything else. The dollar is not good because they are holding it - but because they keep accepting it and accumulating it.
Once we hold our hand on a world's oil spigot, they will have to continue. Simple as that.
miko
